Tallgrass in Deal with Kinder Morgan

Monday, August 20, 2012 @ 06:08 PM gHale

Tallgrass Energy Partners LP will pay $1.8 billion in cash to pick up assets from Kinder Morgan Energy Partners LP, so its parent company Kinder Morgan Inc. can earn regulatory approval for its $20 billion buyout of El Paso Corp.

Kinder Morgan Inc. owns the general partner and limited partner interests in Kinder Morgan Energy.

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Houston-based Kinder Morgan reached a deal with the Federal Trade Commission in March to sell certain assets in the Rockies in order to get approval for the El Paso transaction. The company completed the El Paso acquisition in May.

Kinder Morgan Energy is selling Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Co., the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming and its 50 percent stake in the Rockies Express Pipeline to Overland Park, KN-based Tallgrass Energy.

Including debt, the company values the deal at $3.3 billion. The deal should close in the fourth quarter, pending FTC approval.

Earlier this month, Kinder Morgan Energy acquired Tennessee Gas Pipeline and a 50 percent stake in El Paso Natural Gas pipeline from Kinder Morgan to more than replace the cash flow from the assets sold to Tallgrass.

Kinder Morgan Energy said it plans to use proceeds from the sale to pay back a $2 billion credit facility issued when it acquired the Tennessee Gas Pipeline and El Paso Natural Gas.

‘‘As I previously stated, we would prefer to keep all of these assets, but we anticipated divestiture of certain assets in the Rockies would be necessary to obtain FTC approval,’’ Chairman and Chief Executive Richard Kinder said.

Tallgrass’ owners are The Energy & Minerals Group, Kelso & Co. and Tallgrass’ management team, including Chief Executive David G. Dehaemers, the former chief financial officer and executive vice president of corporate development for Kinder Morgan.

Kinder said Tallgrass wants to keep the workers of the companies involved in the sale.

Kinder Morgan Energy owns an interest in or operates about 29,000 miles of pipelines and 180 terminals.

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